Drill, baby, drill—then wave goodbye as fuels leave U.S.

By Hembree Brandon

Tue, 2012-01-17 10:21

• While drilling more U.S. oil could in theory lessen this nation’s reliance on imported oil, the fact is we could all go and line up onshore at U.S. ports and wave goodbye as much of the fuel we now produce goes sailing away to other countries.

In a world where politics and marketing have more and more become one, ironies abound. And one that stands out like a sore thumb is the continuing agitation of the “drill, baby, drill” proponents to open up more of U.S. public lands and waters to oil/gas exploration with the emotion-charged contention that this would lessen our dependence on imported oil.

If tomorrow a discovery occurred somewhere in the U.S. or its continental waters that would miraculously yield enough oil to satisfy this country’s gluttony for years into the future, the reality is — barring legislation or presidential edict — all that oil wouldn’t go to U.S. refineries and end up at U.S. fuel pumps. It would instead just become part of the world supply, still subject to the vagaries of the international market.

Conjecture aside, the present reality is that a growing contingent of energy analysts agree that increases in production of U.S. oil would have little impact on prices at the pump. Rather, that oil would just flow into the world market and, if any minimal price relief occurred, it would benefit everyone worldwide.

But, since OPEC nations control and can manipulate the largest sources of oil on the planet, they could quite easily counter any increase in U.S. production by curtailing their output by a matching amount, thereby keeping supply and price at their target levels.

Hogwash, you say?

So, OK, guess what was on course to be the biggest U.S. export in 2011? Corn? Soybeans? Autos? Computers?

Wrong. At a time when prices at the pump, in most areas of the country, were still $3 per gallon or higher, and transportation costs were going through the roof, U.S. exports of gasoline, diesel, and jet fuel were projected to set an all-time record, leading the shipments of all other products and commodities.

An estimated $88 billion worth of U.S. fuel products went to export in the year just ended, according to an Associated Press story. U.S. refiners exported 117 million gallons per day of gasoline, diesel, jet fuel, and other petroleum products. Ten years ago, fuels weren’t even in the top 25 U.S. exports.

“There’s at least one domestic downside to America’s growing role as a fuel exporter,” the AP article notes. “The more fuel that’s sent overseas, the less of a supply cushion there is at home.”

Exporting companies won’t say how much more they make selling fuel overseas, the article says, “but analysts say those sales are generating higher profits per gallon than they would have generated in the U.S.; otherwise, they wouldn’t occur.”

This is also something of a fly in the punchbowl of the furor over approval of the proposed 1,700-mile Keystone pipeline project that would carry oil from Canada's tar sands to the Texas Gulf Coast.

While proponents, led by Big Oil, argue that it would (let's all say it in unison) reduce U.S. dependence on imported oil and would create 20,000 jobs, opponents say the jobs figure is more like 6,000 and that the pipeline would expose environmentally-sensitive areas to possible contamination should there be a spill.

Those chary of the touted benefits also point out that the pipeline doesn't represent new supply destined only for U.S. gas tanks, but just more commodity that could end up going to other countries from Texas ports. Canada says much the same: that if Keystone isn't built, they'll pipe the oil to their west coast where it can easily be shipped to more lucrative markets in China and the Far East.

So, while drilling more U.S. oil, or building the 1,700-mile pipeline, could in theory lessen this nation’s reliance on imported oil, the fact is we could all go and line up onshore at U.S. and Canadian ports and wave goodbye as much of the fuel now being produced goes sailing away to other countries.